Archive forApril, 2014

The ratings agency Standard & Poor’s (S&P) lowered the outlook for 15 European banks from stable to negative, reflecting its view that extraordinary government support would diminish soon. These banks include Deutsche Bank, Credit Suisse, UBS, ABN AMRO and Barclays.

Yesterday, ECB President Mario Draghi said the European Central Bank (ECB) is unlikely to engage in Quantitative Easing to bolster economic recovery. On the contrary, a senior International Monetary Fund official said in an interview that the ECB should do all it can to tackle low growth and inflation. The ECB is set to hold its next policy meeting on 8th May.

The China Securities Regulatory Commission, China’s securities regulator, said it would resume examination of initial public offering (IPO) plans later this week. Two month ago, the regulatory body had halted IPOs amid a growing list of companies waiting to go public.

The Japanese Ministry of Internal Affairs and Communications reported consumer prices rose 1.6% y-o-y in March after increasing 1.5% in February. Core CPI, which excludes fresh food, maintained the previous month’s pace at 1.3%. In Tokyo, overall prices were up 2.9% in April vis-à-vis a gain of 1.3% in March, while core CPI stood at 2.7% compared to 1% in the previous month

Today, the Society of Motor Manufacturers and Traders reported that car production in the UK climbed 12% y-o-y to 142,158 units in March, led by further economic recovery in the UK and rapidly improving demand in Europe. Exports totalled 108,947 in March, up 10% y-o-y

Today, a survey by HSBC and Markit Economics showed that the preliminary reading for China’s manufacturing purchasing managers’ index (PMI) improved slightly to 48.3 in April from 48 in March. However, the reading remained below the 50-mark for the fourth consecutive month, indicating further contraction. Additionally, the gauge of new orders and output prices improved in April, but remaining below 50. New export orders also slipped below the 50-mark.

Today, the Finance ministry of Germany revealed that the country is likely to register strong growth in the first quarter. This was ascribed to the recent boost in industrial and construction activities, driven by a favourable winter weather and rising domestic demand. At the same time, the ministry cautioned that seasonally adjusted growth in the second quarter would decelerate. Meanwhile, GDP growth for the full year is expected at 1.8% and inflation reading is estimated to be 1.4% for 2014 and 1.9% for 2015.

Today, China’s State Council announced its decision to cut the reserve requirement ratio (RRR) for qualified rural commercial banks and rural cooperative banks. However, the office did not provide further details.

As per the National Bureau of Statistics, China’s GDP grew 7.4% y-o-y in Q1 2014 after rising 7.7% in the preceding quarter. The reading, outperformed expectations of a 7.3% increase. On a seasonally adjusted basis, GDP growth decelerated to 1.4% q-o-q in Q1 2014 from 1.8% in the previous quarter, missing the expectation of 1.5%.

Today, the British Retail Consortium reported a 1.7% y-o-y decline in UK retail sales for March (on like-for-like basis). This is the biggest decline since April 2013 and is ascribed to the late timing of Easter in 2014 and sharp 2.7% fall in food sales. In February, retail sales were down 1%.

In the same way that, over time, peasant farmers are tempted to cultivate their crops increasingly higher on the lava-enriched terraces on the side of volcanoes, it is important to keep an eye on the frequency of plumes out of the crater. Just as we are becoming used to the notion of economic recovery in the UK, it may seem counterintuitive to have to contemplate a sharp fall in equity markets. Unfortunately, however, the technical evidence for such a scenario is mounting. The implication is a breakdown in confidence, regardless of investors’ views of fundamental factors such as corporate earnings and global growth.

Today, the property website Rightmove stated average asking prices in the UK advanced 2.6% m-o-m to a record level of £262,594 in April, after rising 1.6% in the previous month. This was led by a strong monthly gain of over 7% in some parts of London. In South West and South East regions, asking prices stood at £272,321 and £335,142, respectively. In London and East Anglia, prices were £572,348 and £236,659, respectively. Overall asking prices in the UK increased 7.3% y-o-y, registering its highest increase since October 2007, after gaining 6.8% in March.

Today, data from the National Bureau of Statistics showed that consumer price inflation in China accelerated to 2.4% y-o-y in March from 2% in the previous month, matching market forecasts. Food prices surged 4.1%, while non-food prices rose 1.5%. Meanwhile, producer prices declined 2.3% in March, after falling 2% in February. On m-o-m basis, prices edged down 0.5% in March after rising 0.5% in February.

Today, the Royal Institution of Chartered Surveyors (RICS) stated that the UK house price balance rose to a seasonally adjusted 57% in March from an upwardly revised 47% in February, beating the forecast of 44%. Prices in London and South East UK showed the strongest gains for the month.

The British Retail Consortium (BRC) said UK shop prices dropped 1.7% y-o-y in March, posting the biggest annual decline since the series commenced in December 2006. This marked the 11th consecutive monthly decline in prices. In February, prices lowered 1.4%. Non-food prices were down 3.2%, while growth in food prices eased to a record low of 0.8%. Prices of clothing and electrical goods plunged 12.8% and 4.4%, respectively, during the period.

A survey by the British Chambers of Commerce (BRC) showed further improvement in exports of the UK service sector. The balance of export sales and orders came in at +38% and +39%, respectively. In addition, the balance of domestic sales and orders stood at +38% and +42%, respectively.

Yesterday, German Chancellor Angela Merkel exhibited support for a new trade deal with the US to counter the impact of economic sanctions imposed on Russia. Germany is Russia’s biggest trading partner in the European Union.

Yesterday, Mario Draghi resolved to take all necessary measures to rescue the Eurozone from a prolonged period of low inflation. He stated the central bank could adopt ‘additional non-conventional measures’ if the downside risks to the economy or deflationary risks were to persist. In addition, he again assured the benchmark interest rates were likely to be maintained at current low levels or would be reduced further for an extended period.

Late yesterday, China’s State Council, the government’s executive body, announced a mini-stimulus package to revive the struggling economy. The measures include additional spending to build new railways and tax breaks for small businesses. The executive body also said it would increase financing to construct low-cost housing in the country.

Autodata Corp, a research firm, revealed US vehicle sales increased 5.7% to an annualized rate of 16.4 million in March, ahead of the expected increase to 15.8 million vehicles. This was mainly ascribed to an improvement in weather conditions, which have overshadowed industry sales over the past few months.

The final reading of the HSBC purchasing managers index (PMI) was 48 in March, slightly lower than the flash reading of 48.1. The PMI reading for February was 48.5. On the contrary, the official manufacturing PMI for China edged up to 50.3 in March vis-à-vis 50.2 in February.